Feds want financier's $2M tax refund

Updated 11:57 pm, Saturday, June 29, 2013

Francisco Illarramendi leaves Federal Court in Bridgeport, Conn. Monday, March, 7th, 2011, where he plead guilty to five counts involving investment advising and securities fraud. A prosecutor has asked a federal judge to hold the convicted hedge fund manager’s $2 million tax refund in escrow pending his September sentencing for operating the largest Ponzi scheme ever investigated in Connecticut. less

Francisco Illarramendi leaves Federal Court in Bridgeport, Conn. Monday, March, 7th, 2011, where he plead guilty to five counts involving investment advising and securities fraud. A prosecutor has asked a ... more

That's the tab Francisco Illarramendi may leave behind if a federal judge grants a prosecutor's request to hold the convicted hedge fund manager's $2 million tax refund in escrow pending his September sentencing for operating the largest Ponzi scheme ever investigated in Connecticut.

Illarramendi, a 45-year-old New Canaan resident is the former manager of the Michael Kenwood Capital Management Group in Stamford. He faces up to 70 years in prison after pleading guilty to conspiring to obstruct justice, defraud the U.S. Securities Exchange Commission as well as wire, securities and investment advisor fraud. Those charges carry a maximum 70-year sentence.

Court documents maintain that Illarramendi used the Kenwood Short Term Liquidity, Venezuela and Special Opportunities funds to defraud investors, including a Venezuelan pension fund, out of nearly $500 million in a Ponzi-type scheme.

The SEC has sued him in a civil complaint pending before U.S. District Judge Janet Bond Arterton.

Schechter and Murphy advised Underhill that Illarramendi owes the government for his court-appointed lawyers; is subject to an "enormous mandatory restitution;" and has had his assets frozen in the civil suit.

Additionally, they point out that Illarramendi previously received a $600,000 Connecticut tax refund and spent the money before the court could take action.

"It would be prudent for the Court to ensure that there is not a repeat of Mr. Illarramendi's misuse of funds," the prosecutors said.

Stephen Seeger, Illarramendi's lawyer has no objection to depositing the check with the court clerk. However, Lindy Urso, the lawyer for Mrs. Illarramendi, believes a portion of the check should go to his client for living expenses and the remainder should be held in the civil case.